Fighting ignorance since 1973.(It's taking longer than we thought.)

What happened to all the gold Spain got from the New World?

October 4, 1985

Dear Cecil:

For a good many years, Spain had a virtual monopoly on the importation of gold from the New World. Although some of it wound up on the ocean floor (witness recent discoveries near Florida), we know that an awful lot actually made it to the mother country, helping to make Spain one of the richest and most powerful nations in Europe at the time. Today, of course, it is neither. My question is, what happened to all that gold? I've considered some of the possibilities, but I'm not convinced: (1) The ship captains stole it. (2) The kings of Spain made lousy investments. (3) The Portuguese (or the French or the Italians or the North Africans or somebody) stole it. (4) It was buried somewhere and the folks who buried it forgot where. Since I assume the Spanish have not developed a gold-fueled nuclear device, thereby converting matter into energy, I think I've run out of possibilities. Que paso?

Joseph M., Los Angeles

Cecil replies:

The average person reading this question would probably figure you’ve got filings in the brain pan, Joe, but in fact you have asked a question that baffled Spaniards at the time and has fascinated historians since. A couple things to keep in mind: first, while the flood of gold into Spain in the 16th century seemed like a big haul at the time, by modern standards it was a trivial amount. Total world gold production during the 1500s is estimated to have been around 36 tons; from 1900 to 1976 it was 76,428 tons. (Which still isn’t all that much, incidentally. It’s claimed that all the gold that’s ever been mined would fit into a cube 18 yards on a side.)

Second, you’re right in guessing that a lot of the gold was stolen. One researcher estimates that 10 to 15 percent of the New World gold intended for Spain never got there due to theft, piracy, or other mishap.

Nonetheless, that leaves 85 to 90 percent that did make it, along with tons of silver, which began to be mined in quantity toward the end of the 16th century. Where did it go? The answer has to do with the slippery nature of money. The importation of New World gold into Spain coincided with a corrosive inflation that has come to be known as the “price revolution.” Although prices had dropped steadily during the 1400s, after 1500 they began to rise dramatically — 300 percent by 1600, according to economist Earl Hamilton, who wrote a well-known book on the phenomenon. The reasons for this are complex, but it seems clear that at least in part it was a matter of a sharply increasing amount of money (in the form of silver and gold) chasing a relatively fixed output of goods and services, thus bidding up the price. Among other things the higher prices meant Spanish goods became uncompetitive on European markets. Even the Spanish themselves began buying foreign products, resulting in a lot of cash leaving the country. In addition, inflation stifled local investment, with the grandees spending their dough on conspicuous consumables instead.

For the latter part of the 1500s and on into the 1600s Spain was a debtor nation, spending more abroad than it took in. The result was a net outflow of gold and silver. Attempts were made to restrict the export of precious metals, but without much success. In the end it all simply dribbled away. The problem was that the conquest of the New World left Spain with a lot more money, but not that much more wealth, if you follow me. They didn’t realize that until too late, and suffered centuries of poverty as a consequence.

Spanish gold today: Still dribbling?

Dear Cecil:

Your article on what happened to Spain’s gold left out some recent developments. During the Spanish Civil War the Republican side was supported by socialist volunteers from many countries, including Russia. As the war deepened it looked like the Republicans might lose. So the Russians came up with a brilliant suggestion: why not send the Spanish treasury of gold, silver, and precious stones to Papa Stalin where it would be safe? After all, weren’t the Russians laying down their lives for Spain? The Spaniards bought it. Today the treasury of Spain is safe in the hands of the Russians. I cannot prove this but I believe it.

— Ralph F., Washington, D.C.

Cecil replies:

There are lots of apocryphal stories like this floating around. In Treasures of the World (1966), Robert Charroux claims the treasure of the Spanish Republicans, or at least a treasure, is buried on a beach near the town of Argeles, France. Says Charroux, “it is a big, indeed very big treasure, originally intended for the maintenance of a Communist maquis force. Only eight people knew of its existence and where it was deposited. Then came the 1939-45 war: several holders of the secret were killed and those who returned were never able to find the hiding-place again.” Though the treasure supposedly lies only seven feet underground, the site is subject to frequent flooding that has altered natural landmarks. Postwar construction in the area has further confused matters. Charroux says “hundreds of thousands of people, including the French minister Monsieur Jules Moch” have sought the treasure, all in vain. I take that as a pretty good sign there’s nothing there, but you’re welcome to go look for yourself.